The changes the FCA is proposing are designed to address the ways in which the loan-based crowdfunding model has developed since the FCA last reviewed the sector in December 2016. The FCA has observed the variety of loan-based crowdfunding business models, some of which have become increasingly complex.

Based on its findings the FCA is now inviting responses to a number of specific proposals to change the rules for loan-based firms which cover:

Proposals to ensure investors receive clear and accurate information about a potential investment and understand the risks involved

Ensure investors are adequately remunerated for the risk they are taking

Transparent and robust systems for assessing the risk, value and price of loans, and fair/transparent charges to investors

Gemma Harle, managing director of the Intrinsic mortgage network, said: “Many might just associate crowd-funding with their friend’s charity fun-run page but crowdfunded mortgage lending is becoming a popular option for home-buyers due to their favourable rates.

“The FCA’s announcement today, that it is looking to address the potential short comings in the protection afforded to consumers which use crowd-funded mortgage or home finance products, is laudable.

“Although these innovative forms of lending are providing a fantastic array of options for consumers, they can be higher risk than a traditional mortgage both for investors and consumers. The FCA needs to make sure regulation stays up to date, and the customer is fully informed of it, so that they can enjoy all the possible protections available when entering into this kind of lending arrangement.”